According to the Halifax, the home market was impacted by rising mortgage rates in August, which resulted in the fastest yearly decline in house values in 14 years.
The lender reported that, in the year ending in August, home market values had fallen by 4.6%, or £14,000, on average.
It did note, however, that last summer’s record-breaking real estate prices were used as a comparison.
The Halifax anticipates continued drops for the remainder of the year.
Prices have decreased by 1.9%, it claimed, just between July and August.
Kim Kinnaird, director of mortgages at the Halifax, stated that increasing mortgage costs may now be having a stronger effect on home prices.
The market will keep rebalancing up until it reaches a point where buyers are willing to accept mortgage rates that are higher than those observed over the past 15 years.
In an effort to rein in the UK’s growing consumer prices since December 2021, the Bank of England has raised interest rates 14 times in a row. The current base rate for the bank is 5.25%.
In spite of the fact that financial markets still anticipate an increase to 5.5% this month and subsequent increases, Bank of England governor Andrew Bailey stated on Wednesday that interest rates are now “much nearer” their peak than they were previously.
Home market selling price
According to the Halifax, a subsidiary of Lloyds Banking Group, the largest mortgage lender in the UK, the average home currently costs £279,560.
The only buyers included in its statistics are those who have mortgages; individuals who pay cash for a home or engage in buy-to-let transactions are not. Cash purchasers represent over a third of home transactions, according to the most recent government data.
The Nationwide, a competing lender, reported this week that property prices had dropped 5.3% in the year to August, the largest yearly reduction since 2009.
Unlike earlier in the summer, mortgage rates are not now climbing, but they are still far higher than many borrowers will be used to. Some people have put off buying a home as a result.
According to the financial information provider Moneyfacts, the average rate for a two-year fixed rate mortgage is 6.67%. The typical rate for a five-year contract is 6.16%.
Even if they are happy with the price drop, first-time buyers still have to deal with relatively high payback fees and other cost-of-living constraints like increasing retail prices. However, wage rise has improved affordability.
The Halifax reported that despite the decline in home values, prices were still £40,000 more than they were before to the pandemic and had barely returned to where they had been at the beginning of last year.
Although London is still the most expensive city in the UK to buy a home in, the lender claimed that prices had decreased throughout the country, with the sharpest decline occurring there.
“The number of properties available for sale remains constrained compared to 2019, which was a fairly typical year for the housing market,” said Nicky Stevenson, managing director of estate agent company Fine & Country. Despite the fact that affordability is limited, this is helping to avoid further price drops.
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